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Banking Terminology

Banking Terminology-

Minimum Reserve system of RBI

  • The current system of the Indian government to issue notes is “Minimum Reserve System”.
  • Under this policy, the minimum reserves to be maintained in the form of gold and foreign exchange should consist of rupees 200 crores.
  • Out this reserve, the value of gold to be maintained is rupees 115 crores.
  • This system was introduced in 1956 replacing the proportional reserve system.

CASA Account

  • CASA stands for Current Account Savings Account.
  • The CASA ratio displays the value of deposits maintained in a bank in the form of current and savings account deposits in the total deposit.
  • A higher CASA ratio means the better operating efficiency of the bank.

RAFA Account

  • RAFA stands for Recurring Deposit Account Fixed Deposit Account.
  • The RAFA ratio shows how much deposit a bank has in the form of Recurring and fixed deposits.

Bankruptcy

  • Bankruptcy is a legal declaration of a person who is unable to pay off debts.
  • In generally, Bankruptcy is of two types- Reorganization and Liquidation bankruptcy.
  • Under the bankruptcy of reorganization, debtors should restructure their bill plans to make them more easily met.
  • Whereas under liquidation bankruptcy, Debtors has to sell its assets to make money so that they can pay off their creditors

EFT- ELECTRONIC FUND TRANSFER

  • It refers to computer based system use to perform financial transaction electronically. This term is use for the number of different concept.
  • Card holder initiated transaction, where the card holder makes use of a payment card.

Cheque Truncation

  • Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch.
  •  In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc.
  • Cheque Truncation speeds up the process of collection of cheques resulting in better service to customer, reduces the scope for clearing-related frauds or loss of instruments in transit, lowers the cost of collection of cheques, and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole.

 FII

  • FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII’s generally buy in large volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance Companies, Banks, etc.

FDI

  • FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in a Indian Company.

FINANCIAL INCLUSION

  • It is a delivery of banking services at an affordable cost to the vast section of disadvantage or low income group or this is a facility provided by the banking sector to connect each and every individual to the financial network and the main component of this financial inclusion is no-full account and simplification of know your customers.

Certificate of deposit

  • Commonly known as a CD, an account into which you deposit a sum of money and agree to keep it there for a specified length of time. The account typically pays higher interest rates than standard savings and checking accounts.